Server sales cratered in Q4, says IDC

Blades the only bright spot

Someone has turned the volume knob on the x64 server market from 11 down to 9. And that someone is the economic meltdown.

In the fourth quarter of 2008, when the meltdown was flaring up, server spending dropped off dramatically. The analysts at IDC who track the server space reckon that server sales contracted "sharply" in Q4, falling 14 per cent to $13.5bn, with shipments dropping by 12 per cent.

Those declines might not be as severe as the ones we have all seen in our retirement funds in recent months, but for the tectonically moving server space, where change comes in small increments, this is akin to an earthquake like we haven't seen since the dot-com bust. And it looks like it can - and likely will - get worse.

"The server market experienced its sharpest decline since the middle of the dot-com slowdown nearly seven years ago," confirmed said Matthew Eastwood, group vice president of IDC's enterprise platforms group, which puts together the server stats each quarter.

"All server vendors, geographies, and technology segments were impacted significantly as the global recession gained momentum and market conditions weakened as the quarter progressed. It now appears the slowdown will worsen before any improvement is seen in late 2009 or early 2010.

"In the near term, IT customers will increasingly look for IT optimization projects with strong ROI potential and extend virtualization, consolidation, and migration programs in order to lower capital and operational costs while improving efficiencies."

The economic meltdown was still heating up in the third quarter, as we previously reported, with server makers pulling in $12.6bn in sales, down 5.2 per cent and representing the largest quarterly decline since the fourth quarter of 2002. Shipments in Q3 fell by 2.8 per cent, the worst decline since the final quarter of 2006. Well, until the fourth quarter of 2008 came along.

The so-called volume server segment, where machines cost less than $25,000, saw the biggest revenue decline in Q4, with sales off 16.8 per cent. Enterprise-class machines, which cost $250,000 or more, had a less dramatic decline, only dropping 7.5 per cent compared to the final quarter of 2007. The midrange segment, which is for machines that cost more than $25,000 but less than $250,000, had a 14.5 per cent revenue decline.

It is noteworthy that this is the first time since 2002 that all three segments have declined. As high-end and midrange machines took it on the chin during the last recession early this decade, the volume segment - dominated by x86 machines - picked up the slack as companies cut costs and transitioned whatever workloads they could from proprietary and Unix boxes to x86 machines running Windows and sometimes Linux. This time around, Windows took the big hit.